History[ edit ] The term was originally applied to the banking industry in ; disintermediation occurred when consumers avoided the intermediation of banks by investing directly in securities government and private bonds, insurance companieshedge fundsmutual funds and stocks rather than leaving their money in savings accounts. It was later applied more generally to " cutting out the middleman " in commerce, though the financial meaning remained predominant.
A more complete definition is: E-commerce is the use of electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals.
Is e-commerce the same as e-business? While some use e-commerce and e-business interchangeably, they are distinct concepts. It includes any process that a business organization either a for-profit, governmental or non-profit entity conducts over a computer-mediated network.
A more comprehensive definition of e-business is: Production processes, which include procurement, ordering and replenishment of stocks; processing of payments; electronic links with suppliers; and production control processes, among others; 2. Internal management processes, which include employee services, training, internal information-sharing, video-conferencing, and recruiting.
Electronic applications enhance information flow between production and sales forces to improve sales force productivity. Workgroup communications and electronic publishing of internal business information are likewise made more efficient. It includes e-commerce and e-business.
The framework shows four layers of the Internet economy-the three mentioned above and a fourth called intermediaries see Table 1. B2B e-commerce is simply defined as e-commerce between companies. This is the type of e-commerce that deals with relationships between and among businesses.
The B2B market has two primary components: E-frastructure is the architecture of B2B, primarily consisting of the following: E-markets are simply defined as Web sites where buyers and sellers interact with each other and conduct transactions.
Most B2B applications are in the areas of supplier management especially purchase order processinginventory management i. Table 2 shows the projected size of B2B e-commerce by region for the years There are three cost areas that are significantly reduced through the conduct of B2B e-commerce.
First is the reduction of search costs, as buyers need not go through multiple intermediaries to search for information about suppliers, products and prices as in a traditional supply chain. In terms of effort, time and money spent, the Internet is a more efficient information channel than its traditional counterpart.
In B2B markets, buyers and sellers are gathered together into a single online trading community, reducing search costs even further. Second is the reduction in the costs of processing transactions e. Third, online processing improves inventory management and logistics. Through B2B e-markets, suppliers are able to interact and transact directly with buyers, thereby eliminating intermediaries and distributors.
However, new forms of intermediaries are emerging. For instance, e-markets themselves can be considered as intermediaries because they come between suppliers and customers in the supply chain.
Among the more evident benefits of e-markets is the increase in price transparency. The gathering of a large number of buyers and sellers in a single e-market reveals market price information and transaction processing to participants.
The Internet allows for the publication of information on a single purchase or transaction, making the information readily accessible and available to all members of the e-market.
Increased price transparency has the effect of pulling down price differentials in the market. In this context, buyers are provided much more time to compare prices and make better buying decisions. Moreover, B2B e-markets expand borders for dynamic and negotiated pricing wherein multiple buyers and sellers collectively participate in price-setting and two-way auctions.
In such environments, prices can be set through automatic matching of bids and offers. In the e-marketplace, the requirements of both buyers and sellers are thus aggregated to reach competitive prices, which are lower than those resulting from individual actions.
Economies of scale and network effects. The rapid growth of B2B e-markets creates traditional supply-side cost-based economies of scale. Furthermore, the bringing together of a significant number of buyers and sellers provides the demand-side economies of scale or network effects.
Each additional incremental participant in the e-market creates value for all participants in the demand side. More participants form a critical mass, which is key in attracting more users to an e-market.UBS is a global firm providing financial services in over 50 countries.
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